From January 1st, 2023, the Act on Corporate Due Diligence to Prevent Human Rights Violations in Supply Chains (LkSG) will come into force in Germany.
From this date, companies with more than 3,000 employees must take appropriate responsibility for their entire textile supply chain and ensure compliance with numerous ethical, social and environmental requirements. Just one year later, the regulations will be extended to companies with 1,000 employees. Then they will also have to assume the same due diligence obligations as the large companies.
In the textile service sector, the law will already come into effect at the beginning of 2023 for the internationally active rental service groups. From 2024, larger companies and textile service groups will also be affected. But this is only pure theory. In practice, smaller companies will also be addressed: as soon as a laundry works for a hotel chain or a tour operator with more than 3,000 employees (1,000 from 2024), the LkSG will apply to these customers. What happens then is something that many companies already know from their own experience: The hotels delegate their obligations to the textile service provider, which is why rental service companies must also provide certain contents beyond the legally defined employment limits.
With the Green Button certification, we already fulfil all the important requirements of what is known in short form as the Supply Chain Act. We go into more detail in the following FAQs.
1. What is the aim of the Supply Chain Act?
The Act is intended to improve the international human rights situation. To this end, it obliges companies of a certain size to better fulfil their human rights and labour responsibilities and due diligence obligations in their textile supply chains. With the development of the first GOTS-Faitrade collection in 2011, we took the first steps towards respecting human rights and have been proactively working towards this since then.
2. Which stages of the textile chain does the LkSG apply to?
The law covers all stages that are necessary to manufacture textile products and to provide a service. It therefore begins with the extraction of the raw materials and ends with the delivery to the end customer.
We have established a supply chain management system to identify potential risks in our supplier countries. This evaluates our strategic suppliers, who account for about 95 per cent of our turnover. This way, we know that the producers of Fairtrade-certified organic cotton ensure that human rights are respected from start to finish, i.e. from the field to the end product. Cotton made in Africa is another cotton fibre whose environmental and social conditions can be traced back at least to the spinning mill. That is why we want to make greater use of cotton from sub-Saharan Africa.
©Martin-J.-Kielmann-for-CmiA
3. What are the obligations of an affected company?
The law defines various conditions that must be fulfilled.
- Every company covered by the law must have a policy statement in which human and environmental rights are anchored. We have laid these down in the Dibella philosophy and our Code of Conduct
and published them on our homepage.
dibellatextiles.com/corporate-culture/
dibellatextiles.com/value-chain/ - Affected companies must establish an effective and appropriate risk management system. This should serve to identify, minimise and end human rights and environmental risks or breaches of duty at direct and downstream suppliers in the textile chain. As part of the Green Button certification process, we have established our own risk management system, which fully complies with the requirements of the government seal.
- In order to identify risks in their own business area and at direct - i.e. immediate - suppliers, companies must carry out a risk analysis. The categories to be reviewed must then be evaluated and prioritised. If a risk is identified in the company's own business area and vis-à-vis direct suppliers, preventive measures must be taken immediately. In the course of the Green Button certification, we have identified the greatest risks in our supply chain, defined measures to eliminate them and started to implement them.
- To comply with the LkSG, companies must also set up a complaints procedure through which affected persons and third parties can report legal violations. We have defined an internal procedure for assessment and elimination here: dibellatextiles.com/sustainability/complaintmanagement
- Environmental risks and breaches of duty can also occur at indirect suppliers. If there are indications of human rights and environmental risks, the corporate due diligence obligations also extend to this group. In order to be able to meet this requirement, complete transparency of the supply chain is necessary. We have already achieved this through our cooperation with Chetna Organic and Cotton made in Africa and therefore also know the suppliers with whom we do not have direct business relationships (indirect suppliers).
- The companies covered by the law must report annually and publicly on the fulfilment of their due diligence obligations. We already report on this voluntarily and in great detail here: sustainable action.
4. Which risks are to be considered in the risk analysis?
The Due Diligence Act lists under Section 1, §2 (Definitions) the risks that must be examined in the risk analysis for direct suppliers and, if applicable, also for indirect suppliers. In doing so, the legislator is guided by international conventions, in particular those of the International Labour Organisation (ILO). Within the supply chain, the following risks must be considered:
- Child labour and worst form of child labour,
- forced labour and slavery
- Labour protection obligations under nationally applicable laws
- Freedom of association, right to strike, right to collective bargaining
- Unequal treatment in employment
- Withholding of a fair wage
- Harmful soil degradation, water pollution, air pollution
- Deprivation of land, forests and waters
- Use of private or public security forces to protect business projects
- Production of mercury-added products
- Production and use of harmful chemicals (ZDHC list)
- Non-environmentally sound storage and disposal of wastes
- Export and import of hazardous waste
5. Which parts of the supply chain are subject to corporate due diligence?
Within the own company including affiliated business units as well as with direct contractual partners, the obligations to conduct a risk analysis and to take preventive and remedial measures apply. In addition, if there are indications of human rights violations at indirect suppliers - i.e. companies with which there are no direct contractual relationships - the law also applies there.
6. What tasks can a corporation delegate to a medium-sized textile service provider?
A large buyer covered by the law can require a smaller supplier to implement due diligence processes. In that case, it should at least be possible to provide a risk analysis and assessment. We provide information on our risk analysis and, if requested, support clients in their own textile risk analysis.
7. Who is responsible for compliance with the law?
The implementation of the law is controlled by the Federal Office of Economics and Export Control (BAFA). At least four months after the end of the business year, the companies concerned must submit their report, which is then checked by the authority.
8. What solutions can you expect from Dibella
We started many years ago to make our supply chains transparent, to identify and mitigate risks. One of the first steps on this path was the introduction of textiles made from Fairtrade certified organic cotton. We source the fibres through the Indian cotton cooperative Chetna Organic. Further processing takes place in factories that are certified with the Global Organic Textile Standard and produce according to high ecological and social standards. This means that, on the one hand, the entire production process of our "organic qualities" can be traced from the fibre cultivation onwards, and on the other hand, human, labour and environmental regulations are adhered to. Our contract textiles made of Fairtrade certified organic cotton therefore already exceed the requirements of the LkSG.
In the next step, we have encouraged our strategic suppliers to be certified according to the Sustainable Textile Production (STeP) standard. This standard ensures environmentally friendly manufacturing processes and socially acceptable working conditions in textile production facilities. Among other things, the certification audits the environmental, occupational safety and quality management, but also the human rights situation of our producers.
The award of the STeP seal to our supply partners has laid the foundation for the next level we are aiming for: Certification with the state "Green Button" seal. In order to obtain this, we were able to prove that our producers met the social and environmental criteria in production required by the seal issuer through the STeP qualification. In addition, we were audited on numerous topics of responsible corporate management and product policy. Since most of the requirements stipulated by the seal provider had long been anchored in our corporate philosophy, we were one of the first companies to receive the important "Green Button" award as early as autumn 2019.
But we don't just leave it at certificates and a complaints management system; we also get a picture of the companies ourselves during regular on-site visits. Our Code of Conduct, which forms the basis of every supplier relationship, additionally manifests our requirements for compliance with human, labour and environmental rights. To ensure that these are also observed at the beginning of the supply chain, we conclude contracts with our production partners that regulate the procurement of corresponding fibre raw materials. For this reason, we are also increasingly using Cotton made in Africa as a sustainable cotton fibre.
The higher price for sustainable contract qualities pays for compliance with due diligence obligations in the textile supply chain.
Dibella customers are on the safe side!